Economic Impact of a Dragon Year: Luck vs. Reality

The Year of Dragon is believed to auspicious and lucky in Chinese culture. Research has found that more than the usual number of babies are born in China during Dragon Years, and that there are more marriages than usual.

Then what? To recognize the end of the Year of the Dragon and the start of the Year of the Snake, on January 29, 2025, this post asks: does economic reasoning apply in surprising ways?

Dragon babies born during 1988, 2000, 2012, 2024, 2036 and so on (roughly; from early February to late January of the following year) grow up. Are they actually luckier? The traditional story emphasizes outcomes for an individual, but luck is an odd thing: if one person seems lucky, and if everybody does the same thing, then it is hard for anybody to be relatively lucky.

A different story uses the same facts to emphasize the idea of a self-fulling prophecy. If lucky babies will have better lives then parents should expect more of their children. Parents may also invest more in their child’s education, because the marginal returns to the investment are expected to be greater. So, it should not be surprising to observe that such children have better lives.

Which story is correct? For obvious reasons, research using only data from China could not distinguish these two hypotheses. When ordinary data does not provide a clear answer, careful scientists look for “natural experiments”: i.e., a change in the environment which enables a valid comparative static experiment.

Researchers in Singapore offer that insight. Singapore is an interesting test case because its population consists of multiple significant cultural sub-segments, including Malay, Indian/Bengali and Chinese. The four authors use the experience of Singapore to study what happens when these children attend university or look for a job.

Constrained capacity means that the number of seats in a first year university classroom cannot increase easily, just because more children are born in some years than in other years. So, admission to a first-year classroom need to be rationed. Typical university admissions policies do not ration by varying the price, but price is not the only possible rationing mechanism. This research shows that Dragon babies are less likely (by 2.3 percentage points) to be admitted (even if they received extra expectations and parental investments).

Similarly, if more than the usual number of people enter the workforce in some years then a labour market can adapt. “Adaptation” also implies rationing: as expected from a shift of the supply curve, the wages of Dragon babies are lower. This research also shows that Dragon babies are 1.1 percentage points more likely to be in uncommon roles such as “self-employed”.

Good research distinguishes itself with valid comparative static predictions and by uncovering or discovering results which were not predicted by the simpler hypotheses. For example, this work shows that a cohort of Dragon babies amongst the Chinese population in Singapore affects the prospects for babies at the same time even if their ethnicity differs. In other words, a shift in the market supply curve affects all competitors in that market.

Individuals can be superstitious. That is part of human nature but, when many individuals believe in the same thing, you should also notice extra effects due to that aggregated force.

Their Table 2 provides evidence of a measurable change in the timing of pregnancies on the margin: i.e., to delay a pregnancy in an “unlucky year” and to advance a pregnancy to a “lucky year”. So, even if market-level effects exist, individual preferences also matter.

Now, it is your turn to write.

• Is it possible to profit from the “silly” superstitions of others? Consider the “lucky lottery numbers” given on some fortune cookies [1] [2].
• Some advisors claim to use horoscopes when giving financial advice. Given that financial markets include many sources of randomness, is such advice better or worse than advice based on traditional sources? What information would you need to prove or disprove your judgment?
• Are there any other cultural features where the effects of congestion in life events due to birthdate can be studied?